Quarterly Financial Report - For the period ending September 30, 2019

Statement outlining results, risks and significant changes in operations, personnel and program

1. Introduction

This quarterly financial report (QFR) has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. The report should be read in conjunction with the Main Estimates for 2019-20, as well as Budget 2019. The quarterly report has not been subject to an external audit or review.

1.1 Mandate

The Minister of Public Safety and Emergency Preparedness is the minister responsible for the Royal Canadian Mounted Police (RCMP). The responsibilities of the RCMP are set out in section 18 of the Royal Canadian Mounted Police Act. The RCMP's mandate is multi-faceted, it includes preventing and investigating crime; maintaining peace and order; enforcing laws; contributing to national security; ensuring safety of state officials, visiting dignitaries and foreign missions; and providing vital operational support services to other police and law enforcement agencies within Canada and abroad.

Further information on the mandate, roles, responsibilities and programs of the RCMP can be found in the Part II of the Main Estimates.

1.2 Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the RCMP's spending authorities granted by Parliament and those used by the department consistent with the Main Estimates, the Operating Budget Carry Forward and Capital Budget Carry Forward for the 2019-20 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before money can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts, or through legislation in the form of statutory spending authority for specific purposes.

The RCMP uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on a cash expenditure basis.

2. Highlights of the fiscal quarter and fiscal year-to-date (YTD) results

2.1 Statement of Authorities

For the period ending September 30, 2019, the RCMP had $3,660.2 million in total authorities available for use, as reflected in Annex A: Statement of Authorities. This amount includes the Main Estimates, RCMP Budget 2019 Implementation Votes, Operating Budget Carry Forward, Capital Budget Carry Forward, in-year statutory adjustments, transfer from Treasury Board (TB) central Vote 10 – Government-wide initiatives and proceeds collected from the disposal of Crown assets, as displayed in Graph 1: Comparison of Total Budgetary Authorities below.

Total authorities have decreased by $55.8 million, when compared to the previous year, which includes a year-over-year decrease of $41.0 million in Vote 1 – Operating expenditures, a $43.5 million decrease in Vote 5 – Capital expenditures and a $4.0 million decrease in Budgetary statutory authorities. These decreases are partially offset by an increase of $32.8 million in Vote 10 – Grants and Contributions. The overall decrease is primarily related to the net decrease of $113.8 million in the 2019-20 Main Estimates, a decrease of $36.9 million in the Operating and Capital Budget Carry Forward and a decrease of $3.67 million in the proceeds collected from the disposal of Crown assets. Part of this decrease is offset by a net increase of $90.7 million related to Budget 2019 over Budget 2018 items received through Budget 2018 and 2019 Implementation Votes and $7.6 million related to in-year statutory adjustments.

Graph 1: Comparison of total budgetary authorities as of September 30, 2018 and September 30, 2019 (in millions of dollars)

Comparison of Total Budgetary Authorities as of September 30, 2018 and September 30, 2019 (in millions of dollars)
Comparison of Total Budgetary Authorities as of September 30, 2018 and September 30, 2019 (in millions of dollars)
2019-20 2018-19
Main Estimates $3,427 $3,541
RCMP Votes - Budget 2019 Implementation $100 $0
TB Vote 10 - Government-wide initiatives $0 $0
TB Vote 25 – Operating Budget Carry Forward $69 $100
TB Vote 33 – Capital Budget Carry Forward $50 $56
TB Vote 40 – Budget 2018 Implementation $0 $10
In-year Statutory Adjustments $8 $0
Proceeds from Disposal of Crown Assets $6 $9
Totals $3,660 $3,716
Table 1: Authorities available for use ( in thousands of dollars) Footnote 1
Authorities 2019-20 2018-19 Variance %
Vote 1 - Net operating expenditures 2,599,580 2,640,617 (41,038) (2%)
Vote 5 - Capital expenditures 302,267 345,781 (43,513) (13%)
Vote 10 - Grants and contributions 286,473 253,673 32,800 13%
Budgetary statutory authorities 471,876 475,923 (4,047) (1%)
Total authorities 3,660,196 3,715,994 (55,798) (2%)

For more information on the authority changes impacting the RCMP we would direct the reader to our 2019-20 Main Estimates.

2.1.1 Variance in Vote 1 – Net operating expenditure authorities

The decrease of $41.0 million in Vote 1 – Net Operating expenditures, reflected in Table 1: Authorities Available for Use is primarily related to sunsetting of the funding for the 2018 G7 Summit in Charlevoix, Quebec ($126.9 million), a net reduction in the Operating Budget Carry Forward ($31.6 million), a decrease in funding for a re-allocation of funds to Shared Services Canada to modernize and enhance the Government's digital services ($11.4 million), a net reduction of funding for the International Peacekeeping and Peace Operations ($5.1 million), as well as, some sunsetting of funding announced in prior years Budgets ($13.9 million). These decreases are partially offset by Budget 2019 initiatives such as funding for strengthening the RCMP frontlines operations ($78.4 million), Enhancing Integrity of Canada's Borders and Asylum System ($12.4 million), Delivering Better Service for Air Travel ($2.9 million) and Protecting Canada's National Security ($0.8 million). They are also offset by funding for ensuring security and prosperity in the Digital age ($14.0 million), funding for additional investigative resources to counter terrorism ($6.4 million), funding to increase forensic toxicology capacity in support of the new drug-impaired driving regime ($5.6 million), funding to take action against gun & gang violence ($5.3 million), as well as, funding increases of initiatives announced in prior years' Budgets ($20.9 million).

2.1.2 Variance in Vote 5 – Capital expenditure authorities

Capital authorities have decreased by $43.5 million when compared to the second quarter of 2018-19. The decrease is due to projects nearing completion including the new RCMP National Forensic Laboratory Services facilities ($23.1 million), a number of federal infrastructure assets ($20.0 million), the construction of a new National Operation Center ($8.6 million) and a net reduction in the Capital Budget Carry Forward ($5.4 million). These decreases are partially offset by an increase in funding for ensuring security and prosperity in the Digital age ($11.2 million) and in funding to increase forensic toxicology capacity in support of the new drug-impaired driving regime ($4.3 million).

2.1.3 Variance in Vote 10 – Grants and contributions

The increase of $32.8 million in Grants and contributions authorities is related to increases in the grant to compensate members of the RCMP for injuries received in the performance of their duties. The increase is as a result of a higher number of Members receiving disability pension awards, and the reassessment and indexation of disability pension benefits.

2.1.4 Variance in Budgetary statutory authorities

The net decrease in budgetary statutory authorities of $4.0 million is primarily related to decrease in the rate used to calculate Employee Benefit Plan costs ($8.7 million). There are also decreases related to funding for the Pension Continuation Act (PCA) statutory grant ($1.5 million) as there are fewer recipients and smaller proceeds collected from the disposal of Crown assets ($3.6 million). These decreases are offset by additional Employee Benefit Plan funding received primarily related to initiatives announced in Budget 2019 ($9.8 million).

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

The RCMP has spent approximately 53% of its authorities at the end of the second quarter, which is in line with the previous year, as demonstrated in Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures below, when vote netted revenue is taken into consideration.

Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of September 30, 2018 and September 30, 2019 (in millions of dollars and percentage)

Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of September 30, 2018 and September 30, 2019 (in millions of dollars and percentage)
Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of September 30, 2018 and September 30, 2019 (in millions of dollars and percentage)
2019-20 2018-19
Total Budgetary Authorities $3,660 $3,716
Net expenditures as of September 30 $1,935 (53%) $1,934 (52%)

Table 2: Net Expenditures by standard objects at the end of the second quarter 2019-20 was at 0.1% or $1.7 million higher than the previous year. This variance is primarily the result of a decrease in gross budgetary expenditures of $139.4 million (or 5%) from the previous year, in addition to $141.1 million (or 20%) in decreased revenue collections. A detailed review by standard object emphasizes some significant variances which are described below.

Table 2: Expended by Standard Object at Quarter End (in thousands of dollars) Footnote 2 Footnote 3
Standard Objects 2019-20 2018-19 Variance %
Personnel 1,684,305 1,683,735 570 0%
Transportation and telecommunications 123,249 129,310 (6,061) (5%)
Information 1,149 929 219 24%
Professional and special services 232,289 220,746 11,544 5%
Rentals 49,766 84,153 (34,387) (41%)
Purchased in repair and maintenance 42,352 34,600 7,752 22%
Utilities, materials and supplies 72,321 74,627 (2,306) (3%)
Acquisition of land, buildings and works 27,876 37,924 (10,048) (26%)
Acquisition of machinery and equipment 72,916 110,031 (37,115) (34%)
Transfer payments 140,351 183,348 (42,998) (23%)
Public debt charges 352 375 (24) (7%)
Other subsidies and payments 38,043 64,575 (26,533) (41%)
Total gross budgetary expenditures 2,484,969 2,624,353 (139,384) (5%)
Less: Revenues and other reductions 549,736 690,825 (141,089) (20%)
Total net budgetary expenditures 1,935,233 1,933,528 1,705 0%
2.2.1 Variance by revenues and other reductions

Vote netted revenue collected in the second quarter of 2019-20 decreased by $141 million (or 20%) compared to the same period last year. The decrease is related primarily to the implementation of the new funding model for Contract Policing. Revenues received in the first quarter of 2018-19 were recorded using the old model and treated as re-spendable revenue (VNR). Revenues collected in the first two quarters in 2019-20 have been split between those that are re-spendable and those that are required to be deposited to the Consolidated Revenue Fund.

2.2.2 Variance by information

Information increased by $0.2 million (or 24%) over the same period last year. This increase is related to the timing of invoices and expenditures incurred earlier in the fiscal year compared to the previous year.

2.2.3 Variance by rentals

Rentals have decreased by $34.4 million (or 41%) when compared to 2018-19. This decrease is largely due to one-time costs of security related to the G7 summit held in 2018-19.

2.2.4 Variance by purchased repair and maintenance

Purchased Repair and Maintenance increased by $7.75 million (or 22%) compared to 2018-19. This is related for the most part to the renovation costs of buildings within the Contract Policing program.

2.2.5 Variance by acquisition of land, buildings and works

Acquisitions of Land, Buildings and Works expenditures have decreased by $10 million (or 26%) when compared to the same period in 2018-19. This decrease primarily relates to a reduction in expenditures for the construction of the new RCMP National Forensic Laboratory Services facilities.

2.2.6 Variance by Acquisition of machinery and equipment

Acquisition of machinery and equipment decreased by $37.1 million (or 34%) when compared to the same period in 2018-19 - which is primarily due to one-time expenditures for security costs related to the G7 Summit held in 2018-19. The remaining variance is largely as a result of timing differences in the acquisition of annual inventories, information management and information technology invoices, and investigational aids.

2.2.7 Variance by transfer payments

Increases of $43 million (or 23%) in Transfer Payments are related to the Grant to compensate members injured in the performance of their duties resulting from an increase in the number of members receiving disability pension awards and increase to the benefits paid to existing recipients as a result of worsening disabilities and increases due to the indexation of disability pension benefits.

2.2.8 Variance by other subsidies and payments

Other subsidies and payments have decreased by $26.5 million (or 41 %) when compared to 2018-19. This decreased is primarily due to the timing of items being cleared from suspense accounts.


3. Risks and uncertainties

The Departmental QFR reflects the results of the current fiscal period in relation to the Main Estimates, the Operating Budget Carry Forward and the Capital Budget Carry Forward.

The RCMP is funded through annual appropriations and are, therefore, impacted by any changes in funding approved through Parliament. In addition, it receives a significant portion of funding through vote netted revenue (VNR) from the provision of policing services to provinces, territories, municipalities and first nations communities, as well as from cost sharing agreements with provinces and territories for the provision of DNA analysis by the RCMP. The RCMP also receives VNR authorities to bill Parliamentary Protective Service (PPS) for the provision of security services throughout the Parliamentary precinct and the grounds of Parliament Hill.

On October 6, 2016, the RCMP announced that a settlement agreement had been reached between the RCMP and the plaintiffs in the Merlo and Davidson lawsuits filed on behalf of current and former female regular members, civilian members and public service employees. The settlement agreement was approved by the Federal Court and includes an independent claims process with compensation for women working, or having worked, at the RCMP who experienced harassment, bullying or discrimination based on their gender or sexual orientation during their employment from September 16, 1974 until May 30, 2017. The assessment of claims is the responsibility of an Independent Assessor appointed by the Federal Court. The window in which class members could file claims ran from August 12, 2017 to May 22, 2018. According to statistics posted on the Independent Assessor's website, a total of 3,131 claims were filed. As claims are assessed by the Independent Assessor, compensation awards are currently being paid to successful claimants in accordance with the terms of the settlement.

Given the increasing demands on RCMP resources, particularly on National Security files, the RCMP is facing significant resourcing challenges. The increased concerns around terrorism and extremism, cybercrime, changing demographics, population growth and rapid technological advancements continues to create unanticipated operational requirements and increase the existing organizational costs.

In recent years, the RCMP's reference levels have been constrained by government-wide spending reduction exercises which have resulted in significant financial pressures. In order to assess the financial integrity issues faced by the RCMP and serve as the basis for longer term strategic recommendations to the Minister of Public Safety and Emergency Preparedness, a comprehensive resourcing review was undertaken, and a final report was completed in May 2017. The review findings have been assessed and the RCMP returned to Treasury Board with a fulsome Departmental Review in the fall of 2018 that included short, medium and long-term proposals to address its ongoing resourcing issues. Although Ministers supported the proposed path forward in principle and Budget 2019 identified funding to Strengthening RCMP Operations, the RCMP continues to face challenges to address all of its financial integrity issues and move forward its modernization agenda.

4. Significant changes in relation to operations, personnel and programs

4.1 Operations

In comparison to the second quarter of 2018-19, the RCMP has the conclusion of security measures in support of Canada Hosting the G7 Summit. Due to the nature, and overall magnitude of the G7 Summit, the RCMP's expenditures in many Standard Objects increased in 2018-19, the RCMP will see significant reductions in many of these areas throughout 2019-20.

4.2 Personnel

Subsequent to the end of the second quarter, the Prime Minister announced changes to the senior ranks of the department as follows, effective September 16, 2019:

  • Mr. Kevin Stringer, previously Associate Deputy Minister of the Department of Fisheries and Oceans becomes Chief Administrative Officer of the Royal Canadian Mounted Police.
  • Mrs. Gail Johnson, previously Assistant Deputy Minister of Employment and Social Development Canada becomes Chief Human Resources Officer of the Royal Canadian Mounted Police

4.3 Programs

There has been no significant change in relation to programs in the second quarter of 2019-20.

Approved by senior officials

Approved by:

Original signed by

Brenda Lucki
Commissioner

Original signed by

Dennis Watters, CPA, CA, CFE
Chief Financial and Administrative Officer

Ottawa, Canada

Date: Nov 26,2019


Annex A: Statement of Authorities (unaudited)

Fiscal year 2019-2020 (In thousand of dollars)
Total available for use for the year ending
March 31, 2020 Footnote 4
Used during the quarter ended
September 30, 2019
Year to date used at quarter-end
Gross Operating expenditures 4,379,279 1,075,596 2,069,818
Less: Vote Netted Revenues 1,779,699 279,771 549,736
Vote 1 - Net Operating expenditures 2,599,580 795,825 1,520,082
Vote 5 - Capital expenditures 302,267 42,662 68,302
Vote 10 - Grants and contributions 286,473 69,629 137,400
Pensions and other employee benefits - Members of the Force 398,283 80,315 172,689
Contributions to employee benefit plans (public servants) 61,214 14,930 29,860
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 6,750 1,507 2,951
Refunds of amounts credited to revenues in previous years 22 152
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 5,629 3,618 3,797
Court Awards 0 0 0
Statutory Authorities 471,876 100,392 209,449
Total budgetary authorities 3,660,196 1,008,508 1,935,233
Fiscal year 2018-2019 (In thousand of dollars)
Total available for use for the year ending March 31, 2019 Footnote 4 Used during the quarter ended September 30, 2018 Year to date used at quarter-end
Gross Operating expenditures 4,340,605 1,134,171 2,138,488
Less: Vote Netted Revenues 1,699,988 282,970 690,825
Vote 1 - Net Operating expenditures 2,640,617 851,201 1,447,663
Vote 5 - Capital expenditures 345,781 70,730 104,263
Vote 10 - Grants and contributions 253,673 120,275 179,811
Pensions and other employee benefits - Members of the Force 398,850 79,666 164,705
Contributions to employee benefit plans (public servants) 59,526 14,871 29,743
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 8,250 1,791 3,537
Refunds of amounts credited to revenues in previous years 0 174 693
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 9,297 3,111 3,113
Court Awards 0 0 0
Statutory Authorities 475,923 99,613 201,791
Total budgetary authorities 3,715,994 1,141,819 1,933,528

Annex B: Departmental budgetary expenditures by standard object (unaudited)

Fiscal year 2019-2020 (In thousand of dollars)
Expenditures Planned expenditures for the year ending March 31, 2020 Expended during the quarter ended September 30, 2019 Year to date used at quarter-end
Personnel 3,498,548 863,786 1,684,305
Transportation and communications 223,634 55,789 123,249
Information 4,801 680 1,149
Professional and special services 506,739 121,597 232,289
Rentals 141,330 27,294 49,766
Purchased repair and maintenance 107,398 26,382 42,352
Utilities, materials and supplies 153,834 38,816 72,321
Acquisition of land, buildings and works 103,927 19,750 27,876
Acquisition of machinery and equipment 280,247 42,883 72,916
Transfer payments 293,224 71,136 140,351
Public debt charges 352 176 352
Other subsidies and payments 125,861 19,990 38,043
Total gross budgetary expenditures 5,439,895 1,288,279 2,484,969
Less Revenues netted against expenditures:
Vote Netted Revenues 1,779,699 279,771 549,736
Total Revenues netted against expenditures: 1,779,699 279,771 549,736
Total net budgetary expenditures 3,660,196 1,008,508 1,935,233
Fiscal year 2018-2019 (In thousand of dollars)
Expenditures Planned expenditures for the year ending March 31, 2019 Expended during the quarter ended September 30, 2018 Year to date used at quarter-end
Personnel 3,472,759 873,024 1,683,735
Transportation and communications 213,982 61,769 129,310
Information 4,420 592 929
Professional and special services 476,993 124,920 220,746
Rentals 123,145 50,703 84,153
Purchased repair and maintenance 103,525 21,227 34,600
Utilities, materials and supplies 144,048 39,308 74,627
Acquisition of land, buildings and works 116,855 28,115 37,924
Acquisition of machinery and equipment 276,536 61,102 110,031
Transfer payments 261,924 63,166 183,348
Public debt charges 375 187 375
Other subsidies and payments 221,420 100,676 64,575
Total gross budgetary expenditures 5,415,982 1,424,789 2,624,353
Less Revenues netted against expenditures:
Vote Netted Revenues 1,699,988 282,970 690,825
Total Revenues netted against expenditures: 1,699,988 282,970 690,825
Total net budgetary expenditures 3,715,994 1,141,819 1,933,528
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